June 23, 2022

A car insurance model based on split use for owners of level four autonomous vehicles?

On June 15, 2022, the National Highway Traffic Safety Administration (NHTSA) released its initial summary report on autonomous vehicle accidents collected through its Standing general order. According to NHTSA, last year there were 130 reported crashes involving vehicles equipped with Level 3-5 automated driving systems. Although NHTSA’s recent summary does not specify what caused these crashes, we can anticipate two eventualities in the future: the number of reported crashes could increase as self-driving vehicle technology becomes more widespread, and the question whether accidents were caused by the driving system or by the driver will increasingly be a factor in determining liability. In this context, one wonders how personal auto insurance will evolve to cope with these changes.

For your information, road vehicles come with varying degrees of automation technology. To differentiate between these different degrees, the Society of Automotive Engineers has defined different levels: “level zero” refers to fully manual vehicles, while “level one” refers to cars with basic driver assistance functions (for example, adaptive cruise control) and “level two” refers to cars with more advanced driving features (think Tesla Autopilot). Meanwhile, levels three and four refer to “conditional driving automation” and “high” automation, respectively. Level five, the highest defined level of autonomy, refers to “full” automation, where no pilot is needed.

This article focuses on personal auto insurance for level four autonomous vehicle owners, that’s to sayvehicles equipped with artificial intelligence systems capable of carrying out all driving tasks, but which also allow the driver to take full control if necessary or desired.

The Road Traffic Act and the Compulsory Insurance Act, adopted in Germany last year, provides a kind of roadmap for what car insurance might look like in the context of level four autonomous vehicles. Instead of focusing on drivers, the law requires a “technical supervisor” who can disable the vehicle or take control of its driving maneuvers if necessary. Notably, the Autonomous Driving Act also requires the vehicle owner to maintain liability insurance for the technical supervisor. This seems logical – assuming a technical supervisor on board is required to intervene if something goes wrong, there should be insurance to cover any liability associated with the technical advisor’s failure to do so.

At this point, it’s largely unclear how technical supervisor insurance will be priced and how it will compare to premiums for traditional auto insurance. As auto insurance consumers often know, auto insurers rely on actual loss data to set rates. Since highly autonomous vehicles are still in the testing phase, auto insurers will likely lack loss data, making it difficult to price insurance. (As discussed in more detail below, it’s uncertain at best whether automakers will freely share their test data with auto insurers.) It’s possible that technical supervisor insurance may charge higher premiums, including the cost could be justified in part by covers. For example, technical supervisor insurance could, hypothetically, offer coverage similar to travel insurance, covering the technical supervisor for accidents caused by his or her navigational decision-making, for example, if the self-driving car is caught in a blizzard. while traveling in the mountains. These policies may also cover liability caused by owner errors or omissions (for example, if the car owner forgets to download a firmware update before using it). But conversely, it is possible that technical supervisor insurance is less expensive than traditional car insurance if it turns out that there are fewer risks to insure.

Keep in mind that in a level four autonomous vehicle, a tech supervisor who craves the feeling of being behind the wheel can still take full control of the car’s driving mechanics. Theoretically, when driving the car manually, the driver should be insured as a traditional driver would be. Then, when the driver decides to take a break and devote their attention to something else, the driver’s insurance should change to reflect price differences, policy limits, additional coverages and/or other policy conditions. policy that may apply.

Thus, a form of insurance based on fractional use could provide the solution for personal auto insurance in the Tier Four category. In fact, companies like SMI are already partnering with carriers to enable usage-based, pay-per-mile car insurance. Divide Usage insurance simply takes this concept one step further to take into account the shared role between the driver and the technical supervisor.

This form of insurance could resemble the frameworks that regulators across the country have put in place to establish insurance coverage requirements for ride-sharing companies like Lyft. For example, the California Public Utilities Commission has developed a framework divided into three “periods” based on driver status: Period 1 begins when a driver logs into a rideshare app and becomes available to receive rideshare requests; Period 2 is the time between when the driver accepts a ride request and when the passenger is picked up; Period 3 is the time between picking up and dropping off passengers. The regulations require the ride-sharing company to provide insurance at specified policy limits for each of the three time periods. Essentially, personal auto insurance for the driver/technical supervisor could work much the same way, with separate usage-based pricing, policy limits, and other terms and conditions applicable depending on whether the vehicle is used manually or autonomously at some point in time.

However, for the split-use framework to work optimally, it would be essential for car manufacturers to report to insurance companies at least some limited vehicle condition data (that’s to say, data that indicates whether, at a given time, the vehicle was driven autonomously or by the driver). But automakers may be reluctant to do so because the data could be used against them in product liability lawsuits, either by an injured plaintiff or by the insurer in subrogation proceedings. To solve this problem, governments could standardize the new requirements of different stakeholders in a way that facilitates cooperation and trust, while taking into account the respective interests of each.

Eventually, the technology should reach a point where no technical supervisor on board would be required. This may be due to advances in artificial intelligence and computing power, the use of teleoperation, or both. Undoubtedly, much of the value for consumers of tomorrow’s highly autonomous vehicles will lie in the potential ability to take their attention away from the road (to catch up on work emails, read the morning news, play a game online) while moving comfortably between A and B. Once the technology reaches this stage, there should be less risk of liability for the car owner, and then perhaps car insurance personal will only be needed if and when a passenger occasionally decides to activate the car’s manual functions. vehicle. Until we get to that point, some form of shared-use-based insurance seems like a viable solution for Tier Four autonomous vehicle owners.


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